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Divided payout and future earnings growth : a South African study

Vermeulen, Marise (2011-07)

Thesis (MDF)--Stellenbosch University, 2011.

Thesis

In the past it was believed that the payment of dividends would decrease the funds available to
finance growth, and would therefore lead to lower future earnings growth. This belief was
challenged in recent years with research that tested the relationship between dividend payout and
future earnings growth, both on the individual company and aggregate market level in different
countries. The results contradicted popular belief, and showed that companies with high payout
ratios tend to realise stronger future earnings growth. This study tested the same relationship in
South Africa and concluded that even in a developing country, dividend payout will still lead to
higher future earnings growth.